1Obopay Confidential
John Kothanek Director Compliance and Operations
October 2011
Background and Marketplace
Obopay Confidential 2
Footprint and Investors
Obopay Confidential 3
Global Implementations
Investors_______________________________________________________________________
Obopay:Around the World
YU Cash Wallet in Kenya and expanding in East Africa
Launching most comprehensive mobile payments service in India with broadest retail agent distribution
Powering MasterCard MoneySend offering domestic (US) and cross border
Obopay Confidential 4
SG Obopay Service in Senegal and expanding in West Africa
FIS and STAR are offering Obopay wallet services to their bank customers
Awards & Recognition
MIT TR50IN 2010 MIT Technology Review named Obopay as one of the 50 most innovative companies in the world for our business model, deployment strategies, scalability of technology as well as success rate
Technology Pioneer 2010Obopay was the only financial services provider in the world to be named Technology Pioneer 2010 by the World Economic Forum for our innovation, transformational technology, leadership and substantial long‐term impact on businesses and society.
Fierce 15 Obopay was honored with the Fierce 15 Award by Fierce Wireless and named one of the most innovative companies to take the industry to another level.
Fierce 15In 2008 xchange magazine and Trendsmedia, the events and publishing division of Yankee Group, presented Obopay with the Most Innovative Enterprise Mobile Internet Deployment Award for being the first money transfer service system created exclusively for the mobile phone.
AlwaysOnObopay was selected as a 2010 AlwaysOn Global 250 Top Private Companies.
Best Multi‐channel Capability Project Award Winner 2011”Obopay India and YES Bank were awarded this prestigious award by The Asian Banker
Full Access to Financial ProductsHigh value transactionsFully diversified spend patterns
Limited Access to Financial ProductsMedium Value TransactionsModerately diversified spend patterns
No Access to Financial ProductsLow value transactionsRestricted spend patterns
EMER
GIN
G M
ARKE
TS
DEVE
LOPE
D M
ARKE
TSBANKED
UN‐BANKED
UNDER‐BANKED
BANKED
UN‐BANKED
UNDER‐BANKED
Mobile Wallet: Market Analysis
Obopay Confidential 6
Money Transfer (P2P) & Family Money
Commerce Top upMinutes
Business CheckReplacement
BusinessPayments
Mobile Wallet
All phones Cash load & unloadat Retail Agent
Retail Agent Enrollment
CardlessATM withdrawal
Real TimeBank Links
Obopay Functionality
Obopay Confidential
Access and Funds Flow
Obopay Confidential 8
Obopay has built a unique mobile technology payments platform service transactions across use cases, markets and geographies
P2P
E/M Commerce
Disbursement Solutions
Topup, Bill Pay
Retail (POS and mPOS)
Casual CommerceLoad, link or transact Transact or unload
USSD
• Talent Acquisition/Retention – If your career is “mobile” it’s a good to be you
• Merchant Happiness – Looking to cut costs and listening for alternatives
• Real Time Funds Transfer Expansion – Chasm exists between Wire & ACH
• Evolution of ACH – Same day settlement is needed
• Dodd‐Frank‐Durbin ‐ Regulatory changes mean continued opportunity
• Tightening of State Regulations – Opportunity brings more “Opportunists”
• Conformity of State Regulations – Consistency drives efficiencies
• Consumer Flight to Debit – The data is out there
• The Once Sacred Payment – Not really anymore
• Electronic Bill Pay Saturation – Not every payee is electronic
• Retail and Check Cashers – Ongoing business evolution, massive footfall exists
• Who Really Owns the Customer? – Big muscle distributors
• Social Media II – Sharing become buying, and sellers become social
• “Hacktivists” – External and internal threats are persistent
• Quality of Funds – Brutal breach and data lapse events
Marketplace Observations from a Mobile Money Practitioner
Obopay Confidential 9
Global Deployment Use Cases
Obopay Confidential 10
Market Market opportunity
Mobile prepaid and Virtual MoneyYouth and familiesSME short term, longer term RetailM‐commerceDonations
Market Needs
Send money anytime/anywhere instantlyLoad/unload funds instantly from accountsRequest payments from peers, clientsText to donate from bank or cardTop up, bill pay, buy onlineVertical solutions (disbursements)
Obopay solution
Solution Instant money transfer to anyone including direct from bank account and cards Get Paid for SMEWeb and mobile checkout, Facebook widgets, Social Short codesPrepaid accounts and cards
Deployment Mobile Money as a service for MasterCard, Banks, Insurance, Major RetailerDomestic Partnership FIS/StarCross border to Mexico
Opportunity M‐commerce, ecommerce, walletsInternational RemittancesLong term retail
Case Study: United States
11
Market Market opportunity 693 MM adults, 584 MM subscribers, 41% unbankedAnnual consumer spending: $703B, 91% cash
Market Needs
Cash replacement, convenience for small & essential payments (top up, bill pay)Cost and Time effective P2P solutionSupport for all phone typesAgent distribution and cash in/out, to address limited reach of banks networksCompliance with RBI regulations
Obopay solution
Solution EasyPay (Bill payment, top‐up), EasySend (EasyPay+ transfer, cash out)Agent management platformMulti‐bank solutionInteroperability with ATM and National Switch
Deployment Direct service: Mobile Money ServicesDistributed through Nokia agentsPartnered with Two Retail Banks/Carrier Agnostic
Opportunity Platform Additions Agent management platformBill Pay, Top Up solutionMerchant platform
Future growth
Acquire smaller un‐acquired merchants200,000+ Retailers as AgentsInteroperability for consumers and merchants
Case Study: India
Obopay Confidential 12
Market Market opportunity
39 MM people, 21 MM subscribers by 2011,80% + cash economy
Market Needs
Replacement for cash for person‐to‐person and person‐to‐merchant transactionsConvenient solutions for Bill Pay, Top UpSupport for al phone types, agent distribution and cash in/outMobile Money part of competitive dynamics between Telecom Operators
Obopay solution
Solution Agent management platform, stored value account, money transfer, airtime top‐up, account managementViral customer acquisition (invite), Cardless ATM withdrawals, deposit at the POSDual language supportMobilized bank accounts
Deployment Licensed platform with on‐going revenue shareOperator distribution (YU), Partnership with Equity Bank
Opportunity Platform Addition Agent management platformImplementation experience in market with low bank penetration
FutureGrowth
Extension to Uganda, Congo, East AfricaInbound RemittanceMulti‐Bank
Case Study: Kenya
Obopay Confidential 13
Case Study: Senegal
Obopay Confidential 14
Market Market opportunity 13 MM people, 4% bankedOne of West Africa’s most dynamic mobile market ( 37% annual growth)
Market Needs Solution for unbanked consumers
Merchant payments (utilities, mobile, informal )Person to person transfersCash in/out solution
Obopay solution SolutionStored Value accounts, money transfer, bill payAgent network managementPooled account by Bank branch
Deployment Managed ServiceDistribution through Société Générale branches and commercial partners network (CMS) and TIGO (Mobile Network Operator)Société Générale and partners marketing, sales
Opportunity Platform Additions Bank agent cash–inLocalized Platform (Multiple Languages, Multiple Currencies)
FutureGrowth
Expansion to SSA, Eastern EuropeAdvanced use cases for Eastern EuropeCommon operations across country hubsEurope to Africa and Eastern Europe RemittanceEnterprise and Small Merchants
Compliance and Risk Management
Obopay Confidential 15
Integrated Compliance & Risk Management (Front Office)
The effective Compliance and Regulatory Officer must be in tune with all facets of the business and engaged in all market activity, inclusive of contracts and trends.
Passive observance from the back office reading reports will not suffice!
Service & Operations
Security & Compliance
Consumers & Businesses
Use CasesTechnology &
Platform
Economics
Distribution Partners
Global & Local
Obopay Confidential 16
Which Consumers?
Which businesses?
Which markets?
What demographics?
What consumer problems?
What drives usage?
What is the value added?
What type of transaction service?
Which funding sources?
Which points of transaction are best?
Which devices?
Who are the right regulators?
What licenses do you need? What is the right security format?
What are the risks?
Contactless?Wireless?Which networks and partners?
Own or License?
What is the right pricing?
Who, Why, how, when?
Integrated Compliance & Risk Management (Back Office)
Obopay Internal 17
The Compliance Officer must be actively involved and internally “networked” to key back office processes and leaders.
Obopay Confidential 18
Risk & Compliance:People and Process
• Experienced In‐House LeadershipChief Compliance Officer has over 25 years of Treasury, Risk Management & Operations experience (Yahoo!, Unisys, Allstate, EF Hutton and ACAMS‐Association of Certified Anti‐Money Laundering Specialist)
Director of Risk Operations is ACAMS certified with over 15 years of risk and AML experience (PayPal, Military Intelligence)
• Rigorous Front‐End VerificationThird‐Party Identity Verification
OFAC Screening
Internal Data Analytics
DDA / Card Verification & Authorization
• Account Management & Monitoring ToolsScore Driven Velocity Limits
Real‐time Event Monitoring (24 x7)
Multi‐factor Authentication
Third Party Tools
Obopay Confidential 18
• Regulatory Compliance—Ensure that registration process, transaction monitoring and corrective action is in compliance
• Protect Brand & Reputation—Known for secure and reliable data and transaction environment.
• Profit Maximization—Optimize between fraud loss and revenue
• Revenue Quality—Focus risk management efforts on most suspicious activity so that customers are not inconvenienced
• Data Driven—Drive decisions and priorities with appropriate historical and real time data.
• Operational Efficiency—Minimize manual review and intervention.
• Scalability—Insure systems and operations can handle rapid growth.
• Configurability—Design systems to react to changing patterns without requiring development or coding.
Global Compliance &Risk Management Tenants
Obopay Confidential 19
Global Risk Management Process
Obopay Confidential 20
21
Real Time Event Monitoring
Obopay Confidential
Online – Real Time Analytical
22
Real Time Event Monitoring (REM):Transaction Monitoring
Obopay Confidential
Transaction Scoring
Behavioral History
How long have you been a customer?
How many good/bad/suspicious transactions have you done?
What channel did you use to get to us?
Are you sending or receiving large/small amounts to/from a lot of different places?
Do you load and then send immediately?
Regulatory Requirements
Size & Frequency
Structuring & Layering
Reporting & Monitoring
Parameters
ACH Load, Unload & Funds Availability
Card Load
P2P Send & Receive
Obopay Confidential 23
24
Transaction Scoring Workflow
Obopay Confidential
Obopay Confidential 25
Compliance:Global PCI Certifications
•PCI Compliance ‐ US and India
−PCI Level III – since 2007
−PCI Level I (v1.1) – 2008
−PCI Level I (v1.2) – 2009
−PCI Level I (v1.2.1) – 2010
−PCI Level I (v1.2.1) – 2011
• India attained, US in process (8/31)
−Benefits
Securing cardholder information
Reducing fraud risk
Secure the brand image
Secure customer confidence
Integrated cardholder information architecture
Align with privacy principles
Sustained ongoing compliance
Global PCI ComplianceGlobal PCI Compliance
Obopay Confidential
• Registered with FinCEN as an Money Service Business
• All required domestic state licenses
− Currently licensed in 40 states (domestically required in 40 states & DC)
• Acquiring and maintaining MTLs represents significant barrier to entry, representing a strategic advantage. Applicants must have:
− Impeccable Credibility, Solid Business Case/Premise, Executive Leadership
− Sound Business Practice, Compliance, Audit Achievement and Surety Bonds
• Deloitte independent AML audit completed in Q3 2008
• BDO independent AML audit completed in Q2 2010 & Q4 2011
• Completed 9 state audits in 2009, 13 in 2010, and 6 in 2011
• Local Regulatory Adherence;
− US: Treasury Department and States
• Bank Secrecy Act , OFAC and Patriot Act (KYC)
Independent Partner and State oversight
Obopay Board of Directors Governance
− India/Africa: Reserve & Central Bank Regulations
KYC, BASEL II, Customer Acceptance and AML/AFT
Operative Guidelines for Mobile Banking
26
Compliance: Regulatory and Licensing
States* for which licenses have secured by Obopay (41)
States that do not require a licenses (7)**
States that require International license (1)
Obopay Money Transfer Licenses in the U.S. (41)
State with 2011 license requirement (2)
* Includes District of Columbia ** From an Obopay service perspective
Compliance:Yearly MTL Maintenance Costs
• MTL License Renewal Fees
41 Licenses
License renewal fees range from $250 ‐ $4000
Total cost for all license renewal fees ‐ $35,000
• Surety Bond Premiums
41 Bonds
Surety bond premiums are roughly 2% of the designated surety bond coverage
Total costs for all surety bond premiums ‐ $130,000
• MTL Examinations
13 examinations since January 2009
Total cost of all examinations – $35,000
Average cost of an examination ‐ $2700
Approximately 5 examinations per year ‐ $13,000
• Miscellaneous Cost
Fingerprinting Fee, Number of Transmissions Fee, etc. – Less than $5,000
• Total Cost per year for all MTL Licenses (approx)
$190,000Obopay Confidential 27
Compliance:Yearly Staffing for MTL Administration
• MTL License Renewals
41 Licenses
Hours to complete a license renewal ‐ 5
Total hours spent for all license renewals – 400
• Quarterly Reports, Annual Reports, Semi–Annual Reports
Total Quarterly, Annual, and Semi‐ Annual reports per year – 70
Hours to complete Annual/Semi/Quarterly Annual Reports – 3
Total hours per year to complete reports ‐ 200
• Administrative
Hours to complete fingerprinting and paperwork for newly appointed officers and directors ‐ 5
Hours to complete Secretary of State Reports ‐ 3
Total hours per year to complete administrative reporting – 200
• Audits
Hours to prepare documentation for an audit – 80
Hours spending with examiners during an audit – 120
5 audits per year
Total hours per year spent on audits – 1,000
• Total Staff Hours per year on MTL Administration‐ 1,800
Obopay Confidential 28
29Obopay Confidential
THANK YOU !